Who is going to win the presidential election? Want to bet?

Beyond being a solid gauge of voter sentiment, prediction markets offer profit potential for political observers.  (Alex Nabaum)
Beyond being a solid gauge of voter sentiment, prediction markets offer profit potential for political observers. (Alex Nabaum)

Summary

A political-futures website lets participants wager on presidential outcomes.

If you’re among the millions of Americans following the presidential race, then perhaps you can turn your political obsession into a tidy profit by betting on this year’s outcome—or hedge your potential disappointment and bet against your favored candidate.

PredictIt.org, a political-futures website that allows participants to wager on political outcomes, on April 1 showed President Biden as a slight favorite over former President Donald Trump in the general election—at 48 cents to 47 cents a share, respectively. Those prices reflect a race that is within the margin of error of many polls.

Here’s how it works: Users can bet a maximum of $850 on any single outcome, though a spokeswoman for PredictIt says the average bet is about $100. You place your bet by purchasing shares, ranging in price from a penny to 99 cents, on the market’s platform.

When an outcome is decided, winners get a dollar a share, while losers get nothing. PredictIt takes 10% of profits as a commission, and there is a 5% fee for withdrawing money. The site is required to issue an IRS Form 1099 to traders whose net profits exceed $600 in a calendar year.

A user betting $850 would make a profit of $828 on the 48-cent Biden shares if he wins, or $862.20 if Trump wins, before withdrawal fees.

Similarly, users could bet on Trump’s pick for vice president, with the top contenders being Sen. Tim Scott of South Carolina (25 cents), South Dakota Gov. Kristi Noem (19 cents), former Democratic Rep. Tulsi Gabbard of Hawaii (12 cents), Rep. Elise Stefanik of New York (11 cents) and Arkansas Gov. Sarah Huckabee Sanders (6 cents).

For the Democrats, shares for Vice President Kamala Harris were trading at 92 cents for her to remain on the ticket as either president or vice president.

You don’t have to be a political expert to place a wager, but it doesn’t hurt. Rachel Bitecofer, a political scientist and author, says she has a PredictIt account with a “token balance."

Her early analysis has President Biden winning re-election, Democrats winning back the House, and the Senate being evenly split between the parties. “I don’t see the inherent harm in political betting so long as people aren’t spending ludicrous amounts of money on it," she says.

Besides, she adds, some gamblers who might not otherwise be into politics will follow the news more closely and be engaged in the democratic process. “Anything that gets more people to understand how politics really works is probably overall a good thing," Bitecofer says.

PredictIt, run by Victoria University in New Zealand, has about 80,000 active users, all U.S. citizens, and they span the ideological spectrum, says PredictIt spokeswoman Lindsey Singer. According to the site’s market research, the percentage of registered Democrats, Republicans and unaffiliated voters on the platform closely mirrors the makeup of national voter registration.

Traders tend to be between 25 and 40 years old, and ahead of the 2020 election, they wagered about $150 million on PredictIt, according to Singer.

PredictIt expanded upon the work of Iowa Electronic Markets, administered by the University of Iowa, which has been taking small bets on politics since 1988. The research project is meant to test the accuracy of “the wisdom of crowds," according to the website of Iowa Electronic Markets.

The Commodity Futures Trading Commission has been seeking to close PredictIt since August 2022, when it revoked a so-called no-action letter originally issued in 2014. The no-action letter meant that agency staff wouldn’t recommend taking any enforcement action against PredictIt for operating election markets.

The Fifth U.S. Circuit Court of Appeals in New Orleans last year ruled that the CFTC’s 2014 letter was functionally equivalent to a license. Therefore, the revocation of that no-action letter was a final agency action that could be challenged in court. The issue of whether PredictIt may operate remains in litigation.

“We expect to be operating markets at least through the end of this [election] cycle because the injunction already in place protects operation of the market while the litigation continues," PredictIt’s spokeswoman says.

The CFTC still wants to shut down PredictIt, saying in a statement, “The agency is unwavering in enforcing the statutory prohibitions contained in [the Commodity Exchange Act] where Congress directed the agency from approving event contracts that were gaming, prohibited in state or federal law and against the public interest."

Nick Fortuna is a writer in Ocala, Fla. He can be reached at reports@wsj.com.

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